Could be some nervousness ahead of next Tues UDSA report, particularly corn and wheat.
Corn: The Canaries are Coughing
by Barchart - Fri Jan 8, 6:20AM CST
Things are getting interesting in the corn market these days. I’ve had a number of conversations this week with the common theme being concern King Corn’s rally could be nearing its end. For now, my standard answer is maybe (remember, I used to be a commodity broker so it’s best to hedge my bets), but we haven’t seen fundamental reads on real market fundamentals (as opposed to USDA’s imaginary version) turn bearish. By this I mean track futures spreads on my cmdtyVeiw Cost of Carry table (with 33% or less considered bullish) and national average basis via the cmdty National Corn Basis Index (NCBI, weighted national average). But these two important canaries in King Corn’s coal mine are starting to cough, meaning we need to keep a close eye on them over the coming days and weeks. The March-May futures spread has fallen from an inverse of 0.75 cent on December 31 to an inverse of 1.5 cents one week later at the close of business January 7, covering only 8% of calculated full commercial carry. But the trend has turned down, meaning the carry is now expected to strengthening reflecting a less bullish commercial view of supply and demand. Additionally, the NCBI is starting to show cracks as well, weakening for three consecutive days after coming in at 17.61 cents under March futures Thursday afternoon. Again, basis could still be considered bullish but looks to be starting a bearish trend. Why does this matter? A good friend of mine used to talk about Grains’ Golden Rule in his presentations, with that rule being “First basis, then spreads, then futures.†And since we just passed the anniversary of Sir Isaac Newton’s birthday, the father of technical analysis, let’s recall how we can apply his First Law of Motion to markets with “A trending market will stay in that trend until acted upon by an outside force, with that outside force usually noncommercial activity.†This brings us back to last Friday’s weekly CFTC Commitments of Traders report (legacy, futures only) that showed noncommercial interest holding a net-long futures position of almost 511,000 contracts, reportedly the largest in eight years. Darin Newsom President Darin Newsom Analysis Inc.
BChart Wheat comments;
Wheat markets open the Friday session steady to 4 cents lower. The selling pressure has been mainly in the KC HRW contracts. Thursday wheat trading left the board weaker. CBT futures closed 4 1/4 to 5 1/4 cents lower. KC wheat closed 3 3/4 to 5 cents in the red. MGE futures ended the day down by 2 1/2 to 3 cents. A Reuters survey shows analysts expect USDA to report winter wheat acreage at 31.528 million (between 0% lower and 6% higher yr/yr). On average HRW acreage is estimated to increase 3.6% from 2020/21 to 22.14m acres; and SRW is estimated at 5.884m acres, up 5.6% yr/yr. December 1 wheat stocks are estimated at 1.695 bbu. December 2019 stocks were 1.841 billion. Wheat export sales were reported at 275,313 MT. That was down 48% wk/wk, but still 241% above the same week last year. Total commitments were 20.84 MMT as of 12/31, with 34% HRW, 28.7% HRS, and 26.7% white. Monthly Census data showed 69.5 mbu of wheat was shipped in November. That was a 10 yr high for November. The Buenos Aires Grain Exchange increased their estimate of the Argentine wheat crop to 17 MMT from 16.8 MMT due to realizing higher than expected yields.
Hard to think wheat plantings could rise, with corn and soybean prices where they're at.
Corn: The Canaries are Coughing
by Barchart - Fri Jan 8, 6:20AM CST
Things are getting interesting in the corn market these days. I’ve had a number of conversations this week with the common theme being concern King Corn’s rally could be nearing its end. For now, my standard answer is maybe (remember, I used to be a commodity broker so it’s best to hedge my bets), but we haven’t seen fundamental reads on real market fundamentals (as opposed to USDA’s imaginary version) turn bearish. By this I mean track futures spreads on my cmdtyVeiw Cost of Carry table (with 33% or less considered bullish) and national average basis via the cmdty National Corn Basis Index (NCBI, weighted national average). But these two important canaries in King Corn’s coal mine are starting to cough, meaning we need to keep a close eye on them over the coming days and weeks. The March-May futures spread has fallen from an inverse of 0.75 cent on December 31 to an inverse of 1.5 cents one week later at the close of business January 7, covering only 8% of calculated full commercial carry. But the trend has turned down, meaning the carry is now expected to strengthening reflecting a less bullish commercial view of supply and demand. Additionally, the NCBI is starting to show cracks as well, weakening for three consecutive days after coming in at 17.61 cents under March futures Thursday afternoon. Again, basis could still be considered bullish but looks to be starting a bearish trend. Why does this matter? A good friend of mine used to talk about Grains’ Golden Rule in his presentations, with that rule being “First basis, then spreads, then futures.†And since we just passed the anniversary of Sir Isaac Newton’s birthday, the father of technical analysis, let’s recall how we can apply his First Law of Motion to markets with “A trending market will stay in that trend until acted upon by an outside force, with that outside force usually noncommercial activity.†This brings us back to last Friday’s weekly CFTC Commitments of Traders report (legacy, futures only) that showed noncommercial interest holding a net-long futures position of almost 511,000 contracts, reportedly the largest in eight years. Darin Newsom President Darin Newsom Analysis Inc.
BChart Wheat comments;
Wheat markets open the Friday session steady to 4 cents lower. The selling pressure has been mainly in the KC HRW contracts. Thursday wheat trading left the board weaker. CBT futures closed 4 1/4 to 5 1/4 cents lower. KC wheat closed 3 3/4 to 5 cents in the red. MGE futures ended the day down by 2 1/2 to 3 cents. A Reuters survey shows analysts expect USDA to report winter wheat acreage at 31.528 million (between 0% lower and 6% higher yr/yr). On average HRW acreage is estimated to increase 3.6% from 2020/21 to 22.14m acres; and SRW is estimated at 5.884m acres, up 5.6% yr/yr. December 1 wheat stocks are estimated at 1.695 bbu. December 2019 stocks were 1.841 billion. Wheat export sales were reported at 275,313 MT. That was down 48% wk/wk, but still 241% above the same week last year. Total commitments were 20.84 MMT as of 12/31, with 34% HRW, 28.7% HRS, and 26.7% white. Monthly Census data showed 69.5 mbu of wheat was shipped in November. That was a 10 yr high for November. The Buenos Aires Grain Exchange increased their estimate of the Argentine wheat crop to 17 MMT from 16.8 MMT due to realizing higher than expected yields.
Hard to think wheat plantings could rise, with corn and soybean prices where they're at.
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